What Latin America Can Really Learn from India’s Outsourcing Journey

There are not many people in the world of outsourcing that can match Gokul Agarwalla for experience. The Indian-born 65-year-old has travelled the world several times over in a 40-year career that has seen him represent some of the industry’s biggest names and advise governments from India to Taiwan on how to tap into the outsourcing revolution. (He started working with Wipro when there were less than ten people in the firm.)

Agarwalla first worked in Latin American outsourcing in the late seventies and since then he has advised companies and governments in El Salvador, Colombia, Costa Rica and Brazil. The experience has left him with a clear insight into the natural advantages offered by nearshoring – accessible locations and linguistic and cultural proximity to the US. However, he is forthright in his assessment of the region’s failings to fully capitalize on those advantages. “In Latin America, typically there’s a lot of talk and there’s not a whole lot of action,” he told Nearshore Americas.

According to Agarwalla, the region is severely lagging behind outsourcing hotspots, especially Asia. His advice to the region’s governments looking to catch up is simple and blunt: “It is all about the people, stupid.”

Get Back to the Basics

Agarwalla believes that for Latin America to develop a higher value outsourcing sector, the region must focus more on developing human capital and spend less time worrying about incentives and the business environment. “You need to get back to the basics,” he said. “Do outsourcing companies only go out and outsource because of cost or do outsourcing companies go out and outsource because they are looking for talent? My feeling is that it is the talent first and the cost later.” He added, “Unless these countries focus on investing in and creating their talent I don’t think they will find a whole lot of success and the rest of the stuff – tax incentives, better infrastructure, lower communication costs – are really icing on the cake.”

“Everything in India doesn’t work; the roads don’t work, the airports don’t work, the streets stink, everything it is possible to think of is wrong in India – the logical mind would never go to India to do outsourcing”

As an example, Agarwalla points to his home country and outsourcing market leader – India. “India is the most unfriendly place you can go to do business,” he said. “Everything in India doesn’t work; the roads don’t work, the airports don’t work, the streets stink, everything it is possible to think of is wrong in India – the logical mind would never go to India to do outsourcing. Yet India happens to be the outsourcing location for the rest of the world – why? It is precisely because India has been able to create the appropriate amount of talent at the appropriate time and a virtual infrastructure to cater for that.”

According to Agarwalla, Latin America is “where India was 10 or 15 years ago” – dominated by call centers and stuck at the bottom of the value chain. To start moving up that chain, he believes the region could learn from India’s exploitation of what at first appeared to be a negative phenomenon – the brain drain. “India had educated people for whom there was no place and therefore India exported a lot of talent, whether it liked it or not,” he explained. “A lot of those people started working for Western companies who said ‘these guys are good – they are sincere they are loyal, they are well-educated’ … so these companies began to tell these highly motivated, educated successful employees ‘can you go back to your country and start an operation for us?’”

However, Agarwalla said, Latin American governments do not see the benefits of the approach. “If you talk about such a thing to a government in Latin America they shudder,” he said, “because they think this is throwing the talent away from their country that will never come back.”

Instead, he believes those governments should monitor their expatriate talent and encourage its eventual return. “What Latin American countries can do is develop an inventory of the talent that has been exported from their countries,” he said, “then begin to actively woo that talent to be able to become the bridge between Latin America and successful companies.”

With the ever increasing speed of technological developments and the rapidly changing knowledge needs that come with it, Agarwalla believes it is crucial Latin American countries act if they are to become genuinely competitive in knowledge based outsourcing. “The landscape is changing in the sense that the requirements of people who work in the outsourcing industry have gone up significantly and continue to go up significantly,” he said, “and those locations that are going to be able to cater to that are the ones that are going to win.”

For the moment, Agarwalla thinks that although the potential exists, Latin America is not well-positioned to do that. “All of these countries [in Latin America] have a reasonably good education infrastructure,” he said, “the disadvantage is that there is not sufficient numbers generated in these countries to be able to address the needs of a large outsourcing operation.”

According to Agarwalla, until there is that serious investment in human capital combined with long term thinking and a dedication to staying ahead of the game, Latin America will struggle to progress from a convenient low-value BPO destination to a thriving high-value knowledge based economy.